Google Acquires TxVia To Fuel Google Wallet Ambitions

Google has been struggling to boost merchant and customer adoption of its mobile payments offering – Google Wallet – which it launched early last year. Compared to other alternatives, it has failed to gain much traction after major carriers in the U.S. refused to back the service. Google has reportedly considered sharing revenue generated from mobile payments with carriers, in a bid to get them to support Google Wallet and push the service to their users.

This week it acquired TxVia, a mobile payments technology company, to complement Google Wallet’s core offering, by adding additional features and the ability to scale up rapidly. [1] Google competes primarily with eBay's PayPal, Square, carrier-backed ISIS, and to some extent Apple in the mobile payments market.

TxVia’s core offering is a payments platform, which includes prepaid cards, reloadable cards, gift cards, etc. It has been in business for over five years and has relationships in place with all the major payment networks. TxVia’s platform currently manages around 100 million accounts. Acquiring TxVia could be an expansion play for Google, enabling it to scale up the Google Wallet platform beyond just NFC-enabled mobile payments. It will also bring additional talent to the Google Wallet team, which has seen some attrition in the past months.

Google faces very strong competition in this space from the likes of PayPal and Square, both of which have already amassed a significant user base. Since the net margins in this business are quite low, it is essentially a volume business. The TxVia acquisition will enable Google to scale up quickly with a flexible and reliable platform and payment network partnerships already in place. It also boosts its customer base by 100 million customers, and gives it a direct entry into the enterprise payments space.

We, however, do not expect mobile payments to be a major revenue driver for Google. Nonetheless, it will definitely help Google improve its mobile advertising offering by targeting users better with coupons and promotions through data, stats and trends gleaned from the usage of Google Wallet.

Mobile advertising is one of Google's most important businesses and accounts for nearly one-third of its overall value. We currently have a $670 Trefis price estimate for Google, which stands nearly 4% above its market price.